Delivering the objectives of the electricity market reform

'Good morning,

It is always a great pleasure to speak at the NIA Annual Conference and to see so many familiar faces. This year was certainly important for EDF Energy and I would like to thank John Hutton for inviting me here today, and for his constant support over so many years. We meet at a vital moment for our planet. The world’s governments are gathered in Paris for the United Nations Climate Change Conference, COP21. The negotiations are happening now and it is important to recognise the progress that has already been made.

For the first time, we see the beginning of a shared approach on action against climate change, learning the lessons from previous negotiations. As a result, many countries which did not pledge at Copenhagen have produced their action plans and commitments. 184 have done it, covering 95% of global greenhouse gas emissions.

These are positive signs and let’s now hope that our governments reach an historic agreement. We should all recognise the leading role played by successive British governments on addressing climate change. The UK acted decisively several years ago by putting in place a world leading energy policy to support the transition to a low-carbon economy. We all know what the challenges are for the UK: to deliver a low carbon, secure and affordable energy mix. Two weeks ago, the Energy and Climate Change Secretary, Amber Rudd, set out the direction for the country’s energy policy. Crucially, she reaffirmed the Government’s strong commitment to the UK climate change targets for 2050. More importantly, she said even more needs to be done if the UK is to lead the way on tackling climate change. This is where a clear vision on the UK’s future energy mix is critical. As part of this, she sees new nuclear as “central to our energy future”. The message could not have been clearer and it is not just this Government that agrees on the importance of new nuclear.

It is welcome that the Labour Party continues to do so too. Lisa Nandy, their Shadow Energy Secretary, supports Hinkley Point C and underlines its merits for jobs, skills, UK industrial stamina and its contribution to a secure low carbon electricity mix.The Government has said that nuclear could provide up to 30% of the low-carbon electricity the country will need through the 2030s.The Energy Secretary stated, in no uncertain terms, that energy security must be the “first priority” of any responsible Government. We know that this is when the role of nuclear becomes essential.

We know that the need for an affordable mix of different technologies will be best achieved with reliable baseload nuclear electricity, alongside flexible gas supply to back up intermittent renewables like wind or solar.
Of course, this requires nuclear to become more and more competitive. We fully agree with the Energy Secretary on this point. But it is not just nuclear that needs to face up to the cost challenge. As Amber Rudd said, other technologies – particularly intermittent – must “face their full costs”. That means network upgrades and the cost of backup for when “the wind doesn’t blow, and the sun doesn’t shine”. So the path to a low-carbon economy is ambitious. It requires significant investments. The challenge is how to make sure this investment comes forward. This is at a time when power prices are already low and continue to fall and when we know that the renewal of Britain’s energy generation must be carried out in a way which is also most cost-effective for customers. It is the reality we face. It’s clear the wholesale electricity market alone will not incentivise the significant investment that’s needed in both new and existing generating capacity. So what are the solutions? The answers are all within Electricity Market Reform. The Contracts for Difference have helped make new nuclear build possible. The Capacity Market is another key measure. It is an important technology-neutral tool for encouraging investment and delivering reliable supply, especially through periods of peak demand.

Now we have this measure in place, we need to ensure that it functions as intended. Last year it delivered results that not everyone expected. Many people believe that this year’s outcome will not be very different to last year. In future we need to ensure that the rules are fair so it encourages needed investment in new and existing CCGTs alongside existing nuclear stations. A carbon price at the right level should also continue to be a priority, with the ultimate goal being a strong price under the EU Emissions Trading Scheme. A price that reflects the true cost of carbon is essential if we are to achieve the transition to a low-carbon energy mix. By setting a price for carbon, the UK Government has sent a clear signal to investors in existing and new capacity. We should use the carbon price floor for as long as required in the long-term, beyond 2020.

In addition to the CFD, these mechanisms – the Capacity Market and the Carbon Price Floor – help secure low-carbon electricity.
Existing nuclear qualifies for both because it provides reliable low-carbon power. In the current depressed wholesale market, the capacity mechanism and the Carbon Price Floor will make a difference by helping us to continue to invest in our existing nuclear fleet, and so to go on maintaining a secure and reliable supply of low-carbon electricity. Since we acquired the UK nuclear fleet in early 2009, we have improved dramatically the output of the stations and extended their lives. In 2009, all our AGR nuclear power plants were set to close by 2023. Now we intend for all of them to be running until at least 2023 and some until 2030 and by doing so, we have demonstrated that age is not a barrier to outstanding performance.

This year, I am pleased to announce that we are on track to deliver the safest and most reliable plant performance ever. There have been no Nuclear Reportable Events in the year to date, and unplanned shutdowns remain on course for the best outcomes ever including with Sizewell B at zero unplanned losses this year. Our output in 2015 will be very high and significantly ahead of plan. Performance like this is truly remarkable and I want to pay tribute to all those in EDF Energy and amongst our supply chain partners who are achieving it and as we invest in our existing assets, we are also considering the new assets we need for the future. These include not just the physical assets, but also the skills and development opportunities so that we have the trained people in place to deliver the new infrastructure the UK needs, and to work with assets as they reach the end of their operating lives.It also means building Research and Development capability, as Amber Rudd mentioned, and looking at the range of nuclear technologies, including Small Modular Reactors, which is what we do. But before we get to our new nuclear future, we need to make that first step – Hinkley Point C. In that respect, the deal that EDF signed on 21st October with our Chinese partner was historic. The State Visit of President Xi provided the momentum for this significant milestone for the UK and for France and for China. Together with China General Nuclear Power Corporation (CGN), EDF signed a Strategic Investment Agreement and the associated Heads of Terms for the construction and operation of a proposed new power station at Hinkley Point C. This agreement also paves the way for a number of new nuclear power stations with the signature of the Heads of Terms of a wider UK partnership for the joint development of Sizewell C in Suffolk and Bradwell in Essex.

These agreements build on a partnership with CGN which began more than 30 years ago. This brings expertise and capability that is of great value to the UK nuclear programme. The fact that China is committed to investing £6 billion in Hinkley Point C is a triple vote of confidence in the EPR technology, in partnership with EDF, and in the Hinkley Point C project. And China’s involvement will open up opportunities for the UK to compete in the world nuclear market. I know that many of you in this room played your part and welcomed this major announcement. I wish also to thank the unions for their constant support. Together the agreement means thousands of British jobs and landing UK businesses billions of pounds’ worth of supply chain contracts.

So it is absolutely right to celebrate that event as a major milestone in the UK’s new nuclear renaissance. We are now progressing well to implement the Heads of Terms signed during the visit. This means finalising the numerous long-form contracts, getting clearance from the European and Chinese merger authorities, and the final approval on financing from EDF and CGN boards. Once we have this final investment decision on HPC, we will begin the next stage of public consultation on Sizewell C working towards development consent. As for Bradwell B, EDF and CGN have signed the Heads of Terms of an agreement to undertake the regulatory approval for the Chinese Hualong reactor technology and to carry out project development. We have overcome many obstacles over the years to reach this point.

So, to conclude, I have spoken at this conference several times on our new nuclear plans. Each time a new important milestone had been achieved. And this will continue until Hinkley Point C generates its first kilowatt hour. The challenges faced by the world’s climate not only require a long-term vision, but also determination and consistency in action. We know that the first step to new nuclear being competitive is for it to be built. That is what we are delivering – by working to build and operate the first new nuclear power station in a generation. As I always say, team spirit is essential to achieve great things so I thank you for the part you have all played so far in getting to this point. We look forward to the future. Thank you.'

Vincent de Raviz

 

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